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FHA Credit Guidelines
Credit scores must meet certain
guidelines for all FHA mortgages except for
streamline refinances that do not require any
credit check. Generally credit scores must be
in the following range:
400-620+
Certain circumstances will allow
FHA to be forgiving and may allow credit scores
that are lower if certain compensating factors
are meet such as large retirement savings, higher
then expected income, or more of a down payment.
If your credit score falls within
or below the 520 range you owe it to yourself
to start rebuilding good credit click here to
learn how.
Credit History
Non-Traditional
Credit:
Non-Traditional Credit is acceptable
if the borrower does not have any prior credit
history or if that length of credit history
is too short to qualify. We would need at least
three letters from any repeated monthly obligation
such as rent, utilities, store accounts, cell
phone accounts, and/or any other acceptable
sources. Make sure to let your FHA Loan Officer
know about your current credit situation to
avoid any mishaps in the processing of your
mortgage.
Judgments:
Court ordered judgments
must be paid completely, unless the
borrower has been making regular and timely
payments and the creditor is willing to subordinate
that judgment to the new insured mortgage. The
borrower must provide a satisfactory written
explanation.
Collections:
Handled on a case by case basis.
Bankruptcy:
-Chapter 7
requires a minimum two-year lapse period
since discharge date; minimum one-year lapse
period may be acceptable if bankruptcy was caused
by extenuating circumstances that are not likely
to recur the reason can not be debt caused by
uneducated choices. Only extenuating circumstances
will be considered and only after one year has
passed. In all cases the borrower must have
re-established credit and must demonstrate the
ability to manage financial affairs.
-Chapter 13
is permitted if a one-year payout period
has elapsed and performance has been satisfactory.
The borrower must receive court approval to
enter into the mortgage transaction.
Foreclosures:
Require a minimum of
three years since the completion of
the action and the borrower must have re-established
good credit.
Delinquency or Default
on Federal Debt:
If the borrower is presently
delinquent on any federal debt or is obligated
on any type of federal lien, he or she is not
eligible for an FHA loan until the delinquent
account is brought current, paid, or otherwise
satisfied, or a satisfactory repayment plan
is made between the borrower and the federal
agency owed and is verified in writing.
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